A panel of bankers, legal luminaries and development experts have reaffirmed that African multilateral financial institutions need the preferred creditor status not as a privilege but as a necessity.
According to Fitch, preferred creditor status is "a widely accepted principle under which MDBs are given priority for repayment of debt in the event of a borrower experiencing financial stress."
Moderating the panel "Strengthening Institutional Resilience for Africa's Growth and Prosperity: The Importance of Preferred Creditor Status for Financing African Growth and Prosperity", at Afreximbank's Annual Meetings, Anver Versi, editor of African Banker, asked his panelists for their views on the contentious preferred creditor status which has become a talking point since Fitch downgraded Afreximbank's rating to BBB- from BBB reflecting "higher solvency risk" because of loans owed to it by Ghana, South Sudan and Zambia.
Afreximbank had countered that it would not accept for the loans to be restructured as that would go against the terms of the treaty that set up the bank and which defined its relationship with its sovereign shareholders. According to Afreximbank "the treatment of its loans and other activities is governed by the treaty and not by classifications created outside its framework."
Professor Olabisi Akinkugbe, Associate Professor of Law and Purdy Crawford Chair in Business Law, was first to respond.